For single-member LLC or partnership, you will receive a 1099 from a company paying $600 or more in yearly revenue. However, if an LLC is taxed as an S corporation, it will not receive a form 1099. When to issue or receive a 1099 is essential knowledge for income tax filing with the IRS.
LLC and Tax Implications
Single-member LLCs will need to report their earnings on Form Schedule C on their individual tax return. If you’re a business owner who paid a single-member LLC more than $600, you’ll need to issue them a 1099-MISC.
If a single-member LLC does not elect to be treated as a corporation, the LLC is a “disregarded entity,” and the LLC’s activities should be reflected on its owner’s federal tax return.
When paying a multi-member LLC taxed as a Partnership, or a single-member LLC taxed as a Sole Proprietorship, businesses must send a 1099-NEC (Nonemployee Compensation) form if they pay $600 or more for services in the year.
Sole Proprietorship and 1099 Forms
Does an individual or sole proprietor get a 1099? Typically, sole proprietors do not receive a 1099 form. However, clients who paid at least $600 for services are required to issue a 1099. A sole proprietor must track their own business expenses and pay quarterly estimated taxes on their business income. Sole proprietors report their business income and expenses on Schedule C.
If the W-9 indicates they are an LLC taxed as a sole proprietorship, you need to send a 1099. An LLC will not receive a 1099 if taxed as an S-Corp unless an exception applies.
A sole proprietor is someone who owns an unincorporated business, solely responsible for all aspects of the business.
1099 Filing Procedures
Your business must file a form 1099 with the IRS and to each unincorporated business or individual to whom you paid $600 or more during a given tax year. However, you don’t need to issue a 1099 for any services that were for personal use. You’ll need to file a 1099-MISC for these payments, not a 1099-NEC.